New year, more hope?

Increases in toll rates, fares in MRT/LRT and other public transport, prices of food, etc. greet Filipinos in 2011 (Photo from Inquirer.net/Richard Reyes)

As a people, Filipinos are said to be optimistic even amid the direst economic situation. In fact, 93 percent of the population are hopeful of the new year, according to the latest survey of the Social Weather Stations (SWS). The survey results came amid unchanged data on job scarcity and poverty and unabated rise in cost of living.

Malacañang as expected was quick to interpret the survey results as another unmistakable indicator of the people’s trust in the Aquino administration, which a presidential spokesperson called “an engine of hope”. However, it must be pointed out that the first new year of a new administration is usually greeted with high optimism.

For instance, the December 2002 SWS survey showed an all-time high of 95 percent in hopefulness among Filipinos. The ouster of the Estrada administration through People Power 11 months before provided the context of such unprecedented national optimism. It is also noteworthy that Filipino optimism remains high even amid the most uncertain periods. In December 2008, for example, 92 percent of the population were still hopeful amid the massive retrenchment and economic dislocation triggered by the worst global recession since the 1930s.

Thus, when the Arroyo administration, which turned out to be more corrupt, oppressive, and anti-people than the one it replaced was at last over, the people could only have high expectations that things will now start to get better.

Exposing the “reformist” presidency

To be sure, the willingness of President Aquino, unlike his predecessor, to negotiate peace with Asia’s longest-running insurgency is something to look forward to this year. And certainly we have reason to be optimistic that if unrelenting political pressure is applied such as what happened in the case of the Morong 43, the Aquino administration may just address the injustices committed by the past regime.

But Aquino knows that the hopeful perception of Filipinos will quickly dissipate once promises of reforms are not met and the economic situation remains dismal.  This means new economic policies that reverse or correct the failed policies of the past must be put in place very soon. Unfortunately, reforms in this area leave a lot to be desired.

To illustrate, there were three policy issues that stood out in the first six months of the Aquino presidency which exposed the sort of programs and priorities of the new administration and whose impact may before long dampen Filipinos’ high optimism. These were the enactment of the P1.645-trillion 2011 national budget, Malacañang’s promotion of public-private partnership (PPP), and Aquino’s stand on the Hacienda Luisita agrarian dispute.

Debt-funded dole-out

Operating in a tight fiscal space, Aquino chose to fund a P21-billion dole-out program, in lieu of long-term and comprehensive social services, in his first national budget. Called Pantawid Pamilyang Pilipino Program (4Ps), the local version of the conditional cash transfer (CCT) scheme being promoted and bankrolled by World Bank and Asian Development Bank (ADB) loans in many countries (the 4Ps itself is being funded by $870 million worth of debt from the World Bank and the ADB), the program is expected to quickly benefit a portion of the poor and thus bolster grassroots support for the administration.

But at the same time, Aquino has increased payments for public debts by a whopping P81 billion, which easily comprised 78 percent of the total budget increase and 22 percent of his spending program (together with principal amortization, debt payments will eat up 39 percent of what Aquino is ready to spend this year). He also vetoed the proposal of Congress to cap government borrowings at 55 percent of the GDP thus assuring the continued depletion of public resources due to automatic debt servicing while substantially trimming the budget for state colleges and universities as well as public hospitals and specialty hospitals nationwide.

Think tank IBON Foundation has earlier estimated that payments for the CCT loans could reach around $1 billion, an amount which at current exchange rates is more than double of the total CCT funding and could have been used to build more schools and hospitals or hire more teachers and health workers.

PPP – protecting private profits

As his centerpiece economic program, Aquino has aggressively promoted PPPs to supposedly address the national infrastructure needs, spur development, and create jobs without adding pressure to the government’s fiscal woes (the 2010 budget gap is expected to hit P325 billion).

He organized a PPP summit last November where he announced that investors participating in his PPP projects will be protected from regulatory risks on top of having easier access to bank loans and speedier processing and the usual benefits such as guaranteed profit rates. Regulatory risk insurance requires government to compensate investors whose profits will be affected by intervention from regulatory bodies, Congress, or the courts. Aside from undermining the mandates of these independent bodies, the regulatory risk insurance will also likely be funded by foreign loans that will further aggravate the already heavy public debt burden.

In addition, the 300-percent increase in toll rates implemented starting this month by the South Luzon Expressway’s (SLEX) Malaysian operator as well as rate hikes in the North Luzon Expressway (NLEX) and the Subic-Clark-Tarlac Expressway (SCTEX), and the impending 100-percent increase in metro rail transit (MRT) fares all show how PPP projects directly burden the ordinary folk. There are demands for Aquino to exercise his executive power to stop these increases but doing so will undermine his PPP program and turn off the investors.

Hacienda Luisita and lack of land reform

But perhaps the biggest challenge to Aquino’s claim as a reformist President is in the area of genuine agrarian reform, specifically the just resolution of the longstanding unrest in his family-controlled Hacienda Luisita. He has refused to implement the 2005 decision of the Presidential Agrarian Reform Council (PARC) rescinding the stock distribution option (SDO) deal between his family and the hacienda farmers and farm workers.

Aquino, who justified the 2004 massacre of seven protesting Hacienda Luisita farm workers when he was still Tarlac congressman, continues to defend the SDO even as peasant groups, civil society organizations, and the Catholic church have all demanded that the control and ownership of Luisita lands be effectively transferred to farmers as a legal and moral imperative. Despite his obvious presidential authority to intervene in favor of the farmers, Aquino opted for a hands-off policy when his relatives again duped the farmers last August through a questionable compromise deal intended to keep the SDO scheme.

Independent estimates say that 75 percent of the Filipino poor live in the countryside while official data show that poverty incidence is highest among farmers (44 percent) and fishers (49 percent). Instead of championing genuine agrarian reform, Aquino has trumpeted the narrow and deceptive line of “Kung walang corrupt, walang mahirap”, concealing the fact that a great majority of Filipinos are poor because of a backward rural economy that is still heavily dominated by landlord families like Aquino’s.

Challenges and hopes

More challenging times await the people in 2011. Aside from the increases in toll rates; MRT/LRT, bus/jeepney/taxi fares; and food prices, oil prices are anticipated to again skyrocket as global prices threaten to breach the $100-mark anew. Officials have warned of possible water shortage and rotating brownouts similar to last year’s amid onerous utility rates even as Aquino vows to privatize more water and energy resources under his PPP initiative.

The fiscal deficit does not show any sign of abating despite the P500-million surplus posted in December and the high-profile campaign of revenue agencies to go after tax evaders and smugglers. This stokes fear that new and higher taxes as long demanded by foreign creditors led by the IMF-World Bank will come sooner than later.

Aquino plans to pursue poverty alleviation not within the framework of long-term development but within the context of a supposedly brand new counterinsurgency campaign called Oplan Bayanihan. The CCT dole-outs and foreign development aid will be used for this purpose. This distorts the concept of development work and the inalienable human right to decent living since addressing the structural roots of poverty, such as the lack of genuine agrarian reform, is sidelined in favor of short-term dole-outs and projects.

The victory of the Morong 43 notwithstanding, the systematic violation of human rights perpetrated by the state’s security forces continue under Aquino. Just last January 2, a local leader of the Kilusang Magbubukid ng Pilipinas (KMP) in Nueva Ecija was gunned down, bringing to 23 the total number of victims of extrajudicial killings under the new administration.

Still there is always a reason to be optimistic. But certainly, the people’s strongest hope lies not in the purportedly reformist disposition of the Aquino administration but in exercising their inherent right to demand that the government adhere to their aspirations of peace with social justice and long-term development anchored on wealth redistribution and the utmost respect for human rights. #

SLEx toll hike: Supreme Court defends private profit over public interest

SC reasoning on toll hike sets a bad precedent for future cases questioning the fairness of user fees being charged by private firms operating vital infrastructure (Photo from Wiki Pilipinas)

Last October 21, the Supreme Court (SC) upheld the constitutionality of toll hikes and of public-private toll deals, paving the way for the quadrupling of the rates at the South Luzon Expressway (SLEx). According to SLEx’s private operator, the South Luzon Tollway Corp. (SLTC), they will implement the higher rates either this week or in the first week of November. And as if the pending toll hikes were not burdensome enough, the Malaysian-owned SLTC has also advised the public of another wave of increases before the year ends.

Subsidy, gradual increase?

President Noynoy Aquino apparently recognizes the potential impact of the huge toll hike on his political capital. He disclosed that the Toll Regulatory Board (TRB) is meeting today (Oct. 26) to discuss possible ways to mitigate the effect of the toll increase, including the provision of subsidy or to implement the toll hike gradually. By providing subsidy, Aquino admits the long exposed fallacy that privatization will reduce fiscal pressure on government and affirms criticism that public-private partnership (PPP) is actually costlier. Gradual increases, on the other hand, will only delay and prolong the burden of commuters and motorists.

Subsidized or full cost, gradual or in installments, the public will still pay for the excessive increase in toll. The Aquino administration is not answering the more fundamental questions on people’s access and control of a strategic aspect of economic and social development, which the SC decision on toll hike actually brought to the fore.

Arguing for neoliberalism

In a 75-page unanimous decision penned by Justice Presbitero Velasco, the SC argued not only for the legality of the Supplemental Toll Operation Agreement (STOA) between the Toll Regulatory Board (TRB) and the SLTC as well as other private operators of the country’s major toll roads. The judiciary has also argued strongly for the right of private and foreign corporations to profit “reasonably” from the operation of expressways and in the process affirmed the flawed neoliberal argument underlying the privatization of infrastructure development.

As quoted by The Philippine Star, the SC decision read: “The viability of any infrastructure project depends on the returns – which should be reasonable – of the investment coming from the private sector… While the interests of the public are ideally to be accorded primacy in considering government contracts, the reality on the ground is that the tollway projects may not at all be possible or would be difficult to realize without the involvement of the investing private sector, which expects its usual share of profit… The use of a tollway is a privilege that comes at a cost. The toll is a price paid for the use of a privilege. There are to be sure alternative roads and routes, which motorists may fall back on if they are unwilling to pay the toll. The toll, as might be expected, is pegged at a level that makes the developmental projects and their maintenance viable; otherwise, no investment can be expected for the furtherance of the projects”.

Bad precedent

The SC reasoning sets a bad precedent for future cases questioning the fairness of user fees being charged by private firms operating vital infrastructure in the country. First, the SC distorted the purpose of infrastructure development by declaring the use of a tollway as a privilege and those who could not afford it are not entitled to such privilege. Second, it downgraded the role of the State in providing public goods such as infrastructure. And third, it undermined public interest by making it less important than the right to profit of a private investor.

Infrastructure services, because they play a crucial role in economic and social development, must be considered as public goods and access to them is not a privilege but a human right. At all times, public interest must be accorded primacy and should never be demoted as less important than the expectation of the investing private sector to earn its usual share of profit.

Wrong claims

If the recent SC ruling on toll roads will become part of Philippine jurisprudence, it will have serious implications on other privatized infrastructure such as water distribution in Metro Manila. And given the renewed push for public-private partnership (PPP) in infrastructure under the Aquino administration, the potential impact on the people’s economic and social rights is indeed far-reaching. Aside from roads, power and water utilities, PPP targets, as pushed by the World Bank and already being implemented in rich countries, also include schools and hospitals.

The SC wrongly claimed that the use of a toll road is a privilege since there are alternative routes that motorists can use. In the first place, the national highway going to south Luzon is not a viable alternative due to severe traffic congestion. More importantly, in the context of public goods and development, there is neither economic logic nor justice in penalizing through exorbitant toll a small business or an ordinary wage earner for preferring to use a more efficient route. The purpose of developing infrastructure is to ensure that people’s living conditions are as decent and comfortable as possible, and to help make economic production efficient, viable, and sustainable.

Moreover, the SC also wrongly claimed that the toll is pegged at a level that makes the maintenance of expressway projects and further investment viable. In the case of SLEx, its new toll rates are based on the guaranteed 17 percent return on investment (ROI) stipulated in its STOA between SLTC and TRB. But as I have pointed out in a previous post, public infrastructure does not necessarily entail a guaranteed ROI, which only tends to make user fees unduly onerous.

Costlier in the long run

Finally, for the SC, the public has no choice since tollway projects are supposedly impossible or difficult to implement without a private operator. In the Philippines, privatization of infrastructure is only about two-decades old. Before the 1990s, the public sector was responsible for building, maintaining, and operating roads, utilities, and other infrastructure. But because of globalization and neoliberal restructuring, profit-seeking corporations took over many important State responsibilities such as infrastructure development.

The supposed lack of State resources is often exaggerated to justify the privatization of infrastructure. However, our experience shows that PPPs are costlier in the long run. Take the case of the privatization of the National Power Corp. (Napocor) that only inflated public debt by P203 billion; or the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) where government was forced to bail out Maynilad to the tune of P8.3 billion; or the MRT along Edsa which the previous administration had to temporarily take over through a lump sum payment of $800 million.

State guarantees

In reality, private investors do not bring much investment to the table as often touted but actually rely on foreign loans, frequently with state guarantees. The Aquino administration’s PPP program, for instance, will likely be funded through a multibillion foreign borrowing scheme. One possibility is the creation of a government corporate entity that would sell bonds to foreign creditors. The funds raised will be used to bankroll the infrastructure projects.

To further make the PPP program more attractive, the National Economic and Development Authority (Neda) is proposing to amend the implementing rules and regulations (IRR) of the BOT Law to require state guarantees on PPP projects, including unsolicited proposals. Direct government guarantees assure creditors that, in the case of a loan default, the national government or any of its agencies will assume responsibility for the repayment of debt which the project proponent directly incurred in implementing the project.

Deepened contradiction

The SC decision on toll hikes further deepened the fundamental contradiction between public goods and private capital, and between private profits and public interests, that is inherent in privatization/PPP.

Aside from SLEx, motorists using another privately operated major toll road, the North Luzon Expressway (NLEx), could be paying more soon as well if the TRB will approve the 12 percent toll hike petition to be filed by MNTC. Next month, MRT fares are expected to go up by as much as 100 percent in preparation for its re-privatization. Meanwhile, power and water rates continue to go through the ceiling as privatized utilities amass, in the words of the SC, their “usual share of profit”.

SLEx toll hike: neoliberal privateers should stop imposing onerous user fees

The privatization of development initiatives and state responsibilities must be stopped and reversed (Image from http://www.mtdsltc.com)

In its August 13 editorial, the Philippine Daily Inquirer asked, “When it comes to toll fees, when is an increase ‘reasonable’ and when is it ‘stupefying’”? It argued that the South Luzon Tollway Corp. (SLTC) is entitled to a rate hike considering the “improvements it has done” to the South Luzon Expressway (SLEx).

The newspaper chided critics of the toll hike and reminded them that the cash-strapped government could not subsidize motorists using the expressway. The challenge to the Aquino administration, the editorial pointed out, is to “find that delicate balance” between the need of SLTC to recoup its investments and the need of the public for real relief. It then proposed to remove the 12 percent value added tax (VAT) from the new SLEx toll to “ease the burden on ordinary motorists”.

Still staggering

Removing the VAT, which in the first place should have been excluded from toll rates, will certainly provide immediate relief for some 300,000 motorists that use SLEx every day. Without the VAT, the new rates will go down by P10.2 (for cars and jeepneys) to almost P30.6 (for trailers and large trucks). But does removing the VAT make the SLEx toll hike acceptable and justified? Will the new rates be more reasonable and less stupefying? Taking away the VAT, SLEx toll will increase by 240 to 248 percent, which is still a staggering one-time increase by any standard.

SLTC’s supposed “entitlement” to a rate increase of such magnitude stems from the flawed policy of privatization of infrastructure development, or what President Noynoy Aquino calls Public-Private Partnership (P3). Privatized infrastructure narrowly measures the viability of a project in terms of how much and how fast the contractor will profit from his investment. On the contrary, publicly funded infrastructure measures a project’s success using a broader set of economic and social benefits.

Return on investment

Regulators, in evaluating the toll hike asked by SLTC, simply factored in the doubling of the number of lanes, the installation of TV cameras, and electronic collection system, among other physical improvements in the 27.3-kilometer superhighway. All these reportedly cost SLTC P11.8 billion, which it will recoup through a guaranteed 17 percent return on investment (ROI).

The guaranteed ROI is contained, according to news reports, in the February 2006 Supplemental Toll Operation Agreement (STOA) between SLTC and the Toll Regulatory Board (TRB). The 30-year STOA allows SLTC, which is 80 percent owned by Malaysia-based MTD Capital Bhd and 20 percent state-owned through the Philippine National Construction Corp. (PNCC), to rehabilitate and operate the SLEx.

ROI is a popular indicator used to calculate the profitability of an investment. In its broadest sense, it means total gain from investment (X) minus total cost of investment (Y) divided by total cost of investment (Y), thus: ROI = (X – Y) / Y. At an ROI of 17 percent annually and investment of P11.8 billion, the guaranteed profit of SLTC is pegged at not less than P2 billion a year for 30 years.

Guaranteed profits

With the newly approved toll, however, SLTC will apparently profit much more than P2 billion annually. At a traffic volume of 300,000 vehicles a day, SLTC will earn annual gross revenues of P11.79 billion (of which P1.41 billion will go to the VAT). This means that in one or two years, it can easily recoup its P11.8 billion investment and settle its liabilities, and then neatly profit from its monopoly of SLEx until 2036. See the table below.

Of course, the projected P11.78 billion annual revenues will depreciate over time but it is more than compensated by the annual increase in vehicular traffic in SLEx, which some estimates peg at more than 10 percent a year.

The heavy focus on profitability that is inherent in any private enterprise instead of net economic and social gains make infrastructure projects pursued through P3s such as SLEx ultimately anti-development and anti-people, and therefore makes “that delicate balance” the Inquirer editorial is looking for practically impossible.

Zero ROI

On the other hand, a zero ROI is not necessarily bad in the context of core infrastructure like SLEx and other toll roads, MRT and LRT, water distribution, etc. that should be publicly controlled. According to the US Federal Geographic Data Committee (FGDC) in its paper “Economic Justification: Measuring Return on Investment (ROI) and Cost Benefit Analysis (CBA)”, while it takes an ROI ratio greater than zero to be attractive, “A sub-zero ratio may not automatically ‘kill’ a project, because it may result in a required capability that doesn’t currently exist”, said the FGDC. (FGDC is an interagency body that publishes the National Spatial Data Infrastructure.) 

It further pointed out that “Not all government functions are required to have a positive rate of return as they are in the business world. Government is required to provide certain services to the public, and so is more tolerant of low ROI”.

Thus, if government did not privatize SLEx, there is room to compute its toll using a multi-faceted approach that takes into account not only the direct financial gains from the investment but indirect and long-term development gains as well. Note, for instance, that 60 percent of landed and export products to and from Luzon pass through the SLEx and as much as 20 percent of its traffic volume are commuter buses and cargo trucks. As such, it produces economic benefits for the country that are not captured by private profits.

Raising revenues

But the government is bankrupt and could not undertake infrastructure projects, proponents of P3s and privatization will claim. People’s organizations have long been campaigning for the de-liberalization of the economy, repeal of automatic debt servicing, cancellation of odious debt, etc. aside from curbing high-level bureaucratic corruption, tax evasion by the biggest foreign and local corporations, etc. to raise much needed revenues for infrastructure and other development and social needs of the country.

But the government is corrupt and inefficient unlike the private sector, privateers will argue. Should we then just allow the CEOs of Meralco, San Miguel, Metro Pacific, and the transnational corporations (TNCs) to run the government instead of elected political leaders? Practically, this has been already the case in the Philippines especially under imperialist globalization, and now more increasingly under the Aquino administration.

Concrete and doable alternatives to privatization are available. The neoliberal privateers should not be allowed to burden the people and undermine development with onerous and outrageously increasing user fees like the SLEx toll, or the MRT fare, water and power bills, etc. The privatization of development initiatives and state responsibilities must be stopped and reversed. The people and not the corporations should run the government.

Toll hike, VAT, soaring utility rates in lieu of new taxes

SLEx toll will quadruple due to VAT and privatization of infrastructure development (Photo from ryucloud/photobucket.com)

President Noynoy Aquino has promised that his administration will try not to raise or impose new taxes to bridge the widening fiscal gap, which is expected to reach a record high P325 billion this year. But while not imposing new taxes (yet) to address its fiscal woes, the Aquino administration is still squeezing the people dry through unabated increases in prices and rates charged by privatized and deregulated utilities, and by getting the most out of the previous administration’s most onerous and anti-poor revenue-raising tool – the 12 percent value added tax (VAT).

By the way, did you know that the VAT, like privatization, was also a legacy of Noynoy’s late mother, President Cory Aquino? On July 25, 1987, Cory issued Executive Order (EO) No. 273, adopting the VAT. Cory issued the EO just before the 8th Congress opened, thus preempting the legislature’s constitutional power to impose taxes. The move was a ploy to swiftly implement the International Monetary Fund’s (IMF) prescription to impose the VAT and ensure that the bankrupt Cory administration can raise revenues for continued debt servicing.

Controversial tax

Today, the ever controversial tax is again in the headlines following the insistence of Aquino’s Bureau of Internal Revenue (BIR) chief to impose the regressive VAT on toll. If Noynoy will not intervene and order the Department of Finance (DOF) and BIR to suspend its implementation, fees charged by toll operators around the country will go up starting Monday (August 16) as the cash-strapped Aquino administration collect from motorists the VAT on toll roads.

The table below summarizes the current rates and new rates to be charged (12 percent increase, representing the VAT) by major toll roads in Luzon, based on a notice released by the Toll Regulatory Board (TRB).

Meanwhile, those using the South Luzon Expressway (SLEx) will feel the double whammy of VAT and toll hike that will raise the toll charged by its private operator, the South Luzon Tollway Corp. (SLTC). Motorists using the SLEx will see their toll almost quadruple mainly because of the new rates approved by the TRB last May.

Ironically, the principal author of the 2005 VAT law Republic Act (RA) 9337, Senator Ralph Recto, is strongly opposing the move arguing that VAT should not be imposed on a government service. Recto, who belongs to Aquino’s Liberal Party (LP) and presently chairs the Senate ways and means committee, suffered the VAT backlash and lost his reelection bid in the 2007 midterm elections, which explains his stance on the VAT on toll. Aside from Recto, another LP member, Sen. Franklin Drilon is also questioning the BIR plan because it is supposedly imposing a tax on tax. Business groups, in particular those operating in Southern Tagalog’s industrial zones, on the other hand, have warned of commodity price hikes while transport groups plying the SLEx threatened to increase fares.

Aquino’s dilemma

While some prominent LP members are against it, the Aquino administration’s dilemma is that backing down on the BIR plan to collect the unpopular VAT on toll will further limit its already scant revenue sources, which have been perennially drained by trade liberalization, automatic debt servicing, promotion of foreign investment and export production, and onerous privatization contracts, on top of tax evasion, smuggling, and fat paychecks of high officials of the bureaucracy.

Given the persistent external pressure from the IMF for so-called fiscal consolidation and to hike the VAT rate to 15 percent, it is unlikely that Aquino’s economic team – led by ardent VAT champions and neoliberals DOF Secretary Cesar Purisima (who as Arroyo’s DOF chief helped design and lobbied for RA 9337) and Socioeconomic Planning Secretary Cayetano Paderanga (who was among the UP economists that pushed for VAT and VAT rate hike) – will advise Aquino to heed the public clamor and stop the VAT on toll. But if Aquino will push through with the VAT on toll, he risks suffering a major political blow very early in his term because of the measure’s unpopularity and severe impact on the people. Such setback can be further compounded in case the Supreme Court (SC) decides favorably on petitions filed against the VAT on toll amid growing public opposition.

Nonetheless, the pending toll hikes, whether implemented or not, further highlight the lack of real reforms that matter to the people under the Aquino administration. That Aquino is trying to widen the scope of the onerous and anti-poor VAT is proof that prospects of better and more decent living conditions for social sectors neglected by past regimes remain dim, if not dimmer.

VAT on privatized, deregulated utilities

And even if the VAT on toll is withdrawn, the continued implementation of neoliberal policies will still oppress the poor and impoverish more people. Note for instance, that in the case of SLEx, the VAT imposition is just a small portion of the enormous increase in toll that stems from infrastructure privatization, the same policy that Aquino highlighted in his State of the Nation Address (Sona). With Aquino’s promotion of so-called Public-Private Partnerships (PPPs), we expect more similar increases in the future as these are built-in mechanisms to make privatization attractive to potential investors. A case in point is the proposed MRT fare hike, which the Aquino administration is seeking in order to pay for the guaranteed debts and profits of private investors that took part in MRT’s development and ease government’s fiscal burden.

Indeed, indications show that privatization and deregulation will not only continue but will even expand under the new government. Just barely one and a half months into the much hyped Aquino administration, we have already seen oil prices and electricity rates go up. Players in the deregulated oil industry have recently raised the pump prices of diesel, kerosene and gasoline by 50 centavos to P1 per liter, with the Department of Energy (DOE), just like in the past, warning of more oil price hikes in the coming months. In addition, the Manila Electric Co. (Meralco) has again increased its generation charge by 44 centavos per kilowatt-hour (kWh). More nationwide increases in the privatized and deregulated power industry, based on petitions pending before the Energy Regulatory Commission (ERC), should be expected by hapless households.

In the context of its fiscal woes, the Aquino administration welcomes these increases despite their harsh effect on consumers as they mean more VAT collections for the government. In fact, oil and electricity are the two largest sources of VAT revenues, increasing in direct proportion with rising pump prices and monthly electricity bills. From November 2005 (when RA 9337 was implemented) to December 2009, the VAT burden from oil and power has reached P239.94 billion, or more than 65.3 percent of the total revenues (P367.28 billion) generated by RA 9337.

Similarly, higher toll means higher VAT collection for the government. Under the old SLEx fees, for example, government’s VAT revenues will only range from P2.64 to P7.80 per vehicle per trip. But under the new rates approved by the TRB, the VAT burden of SLEx users will quadruple to P10.2 to P30.6. Overall, taxpayers will shoulder a tax burden of more than P12 billion annually from the VAT on toll.

No new taxes? It does not make a difference amid rising rates and prices due to deregulation and privatization, and continued imposition and expanded coverage of the 12 percent VAT. And lest we forget, Aquino’s promise of no new taxes is highly conditional on the results of its anti-smuggling and tax evasion drive which means the worst is yet to come.